Novo Nordisk, like its rival drugmakers in diabetes, is still grappling with the pricing pressure that’s assaulted the business for a couple of years. That’s the bad news. The good? Pricing isn’t the be-all of growth. It’s portfolio.
That’s how CEO Lars Fruergaard Jorgensen sees it, after a quarter of solid growth, a guidance raise for the year and payer negotiations that so far have yielded important stability in two key commercial formularies.
“It’s important to not only focus on price,” Jorgensen said in an interview, pointing out that Novo sales grew 7% in the first half of the year, “a year when we have seen a price decline.”
“If you have a strong portfolio of products you can still go out and drive volume,” he added. “You can prioritize products with a slightly higher clinical profile,” such as Novo’s newer basal insulin Tresiba, an improvement over its old standby Levemir.
Tresiba has ratcheted up its fraction of that increasingly tough field to 8.5% from 5% at the beginning of this year, executives said during the company’s second-quarter earnings call. And it expects to hit its goal of 10% by year’s end, despite an FDA delay on updating its label with new safety information.
Another example? Recent developments in the GLP-1 class. Last week, GlaxoSmithKline said it would pull its weekly med in that class, Tanzeum, as it reworked its branded portfolio to prioritize its most promising products. That’s one drug that’s been priced lower than its rivals to no avail.
There are clear differences among the GLP-1s, Jorgensen pointed out, including varying abilities to lower blood glucose and effects on body weight; Novo’s Victoza, for instance, has proven to aid weight loss to the point that a higher dose of the same molecule is now approved to treat obesity.
“The launch of GLP-1 products relies a lot on efficacy ... so they are more differentiated, and those products that have not had the best clinical profile have played more with price,” Jorgensen said. “You have two efficacious products, Trulicity from Eli Lilly and Victoza for Novo, and those are the two products doing the best in the market.”
And luckily for Novo, that’s a growing market. The company’s predictions that overall GLP-1 growth would offset competition from Trulicity—a weekly-dosed rival that’s proven a feisty share-stealer—are proving true so far. Victoza, Novo’s daily GLP-1 med, has seen its share dwindle to 46%, but sales grew 21% in the second quarter nonetheless. The company’s follow-up med semaglutide, also dosed weekly, is due for an FDA decision date later this year.
Overall, Novo’s diabetes sales swelled by 11% for the first half—9% in Q2—and the good outweighed the not-so-good enough for Novo to raise its 2017 guidance. The Danish drugmaker now expects sales growth of 1% to 3%.
One setback was the FDA’s decision to expand its review of a label update for Tresiba, putting off a decision on that potential boost to next year.
“It would have been easier if we gotten Switch data on the label,” Jorgensen said during Wednesday’s earnings call, referring to two trials showing a lower risk of hypoglycemia for Tresiba than Sanofi’s long-dominant Lantus. But FDA rules will still allow medical liaisons to talk with doctors about the data, because it’s peer-reviewed, he added.
The delay Novo chalked up to the FDA’s decision to pull in data from two Switch studies as well as the earlier Devote study, at a time when the agency is considering expanding the focus of diabetes drug labels beyond the gold standard measure, hbA1c, which tracks blood glucose over time.
“They are now voicing to go beyond blood sugar control and one of the most obvious targets is hypoglycemia,” Bernstein analyst Ronny Gal relayed in a Wednesday investor note.
Gal noted Novo’s overall reticence on 2018 contracting—apart from the comments about formularies from CVS Health and Express Scripts, which stayed “stable”—as negotiations, particularly in Part D plans, continues. His take is that discounting pressure continues as well.
“Novo can stay silent but we expect 2018 contracts to have been tough,” Gal said. “Novo may not be giving details but there was ... really no reason for payors not to push for further discounts. ... We suspect the 2018 pricing trend will be as bad as 2017.”
To Jorgensen’s point about pricing—and, perhaps, Gal’s—Novo said Wednesday it would no longer offer that sort of guidance. The announcement triggered questions from analysts, who wondered how and whether Novo would stick to its guidance for 2018 and beyond. The answer? Yes. The answer to requests for quarterly estimates? No.
“It would be nice if we provided detailed guidance for individual quarters, but life is not that good for analysts yet,” Novo CFO Jesper Brandgaard said dryly.